The decision – which sets the pay of 2.3 million Australians who are paid the minimum wage or award rates – will apply from July. The FWC will deliberate as Labor and the unions take up wage stagnation as a rallying cause against the Turnbull government.

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In its submission Labor asked for “a fair and economically responsible real increase”, more than the current rate of inflation of 1.9%. Labor said the pay rise should take into account “flatlining wages, rising cost of living pressures and record high levels of household debt relative to incomes, continuing and persistent earnings inequality, and the gender pay gap”.

Labor’s employment spokesman, Brendan O’Connor, said “there is a pressing need to restore the link between hard work and fair reward”.

The Turnbull government’s submission gave evidence about the state of the economy but did not nominate its preferred size of pay rise.

It noted that labour market conditions had strengthened, with unemployment down to 5.5%, but that there was still “spare capacity” with an underemployment rate of 8.3%.

The government said wage inflation was “subdued” at 2.1% but was expected to rise to 2.75% in the year to the June 2019 quarter.

It said the commission’s decision “should be consistent with the continuation of recent positive economic developments to support economic growth, job growth and productivity growth”.

Employer groups including the Australian Industry Group and the Australian Chamber of Commerce and Industry have called for minimum and award wage rises of 1.8% and 1.9%, in line with inflation.

The ACCI chief executive, James Pearson, blasted the ACTU’s pay claim as “unrealistic” given the “tough conditions that small businesses face”.

Pearson said that employers “recognise the need for wages to rise as the cost of living rises … but for businesses to be able to stay open and retain employees, the right balance has to be met”.

The NRA asked the commission to “give full and genuine consideration to the prospect of a 0% change to minimum wages” in the 2018 review.

Its chief executive, Dominique Lamb, said changes to the retail and fast food awards that introduced overtime pay in January meant retailers’ could not afford pay rises. She warned the commission that pay rises above inflation would leave employees worse off because employers would cut shifts or make redundancies to pay for them.

Unions urge Fair Work Commission to raise minimum and award wages by 7.2%